Farm Sector Profitability Weakens Considerably in 2015 From Recent 2013 Peak
Farm sector profitability is forecast to decline for the second straight year. Net cash farm income is forecast at $93 billion, down about 28 percent from 2014 levels. Net farm income is forecast to be $55.9 billion in 2015, down about 38 percent from 2014’s estimate of $90.4 billion. If realized, the 2015 forecast for net farm income would be the lowest since 2002 (in both real and nominal terms) and a drop of 55 percent from the recent high of $123.3 billion in 2013. The smaller change in net cash farm income relative to the broader net farm income measure is to be expected, because producers can exercise greater control on the timing of cash receipts and expenses and thereby moderate large swings from year to year.
Lower crop and livestock receipts are the main drivers of the decline in 2015, while cash production expenses are projected down by 2.3 percent. Crop receipts are expected to decrease by $18.2 billion (8.7 percent) in 2015, led by projected declines of $8.6-billion in corn receipts, $5.7 billion in soybean receipts, and $2.7 billion in wheat receipts, as prices for all three commodities declined. Livestock receipts are forecast to decrease by $25.4 billion (12 percent) in 2015. As with crop receipts, the primary driver is lower commodity prices, in this case for milk, hogs, broilers, and cattle/calves. Government payments are projected to rise $1.0 billion (10.4 percent) to $10.8 billion in 2015.
Farm asset values are forecast to decline by 2.8 percent compared to 2014, and farm debt is forecast to increase by 6.3 percent. The farm sector equity measure combines both of these, and is down by $104.2 billion (4.0 percent) compared to 2014. The primary driver of the drop in asset values is farm real estate, down $36.9 billion (1.6 percent). Debt is driven by increases in both real estate debt (up 6.1 percent) and nonreal estate debt (up 6.5 percent). While the movements in the balance sheet show an increasingly leveraged farm sector, risk measured at the sector level remains low.
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Median Income of Farm Operator Households Expected To Dip in 2015
The median income of farm households has increased steadily over the past 5 years, peaking at an estimated $80,620 in 2014. However, the median income of farm households is forecast to decrease slightly in 2015, to $78,284. Given the broad USDA definition of a farm, many farms are not profitable even in the best farm income years. The projected median farm income earned by farm households of -$1,624 is lower than the 2014 estimate of -$869. Most farm households earn all of their income from off-farm sources—median off-farm income is forecast to increase 3.6 percent in 2015 to $72,494. (Note: Because some farm households derive more of their income from farming, median total income will generally not equal the sum of median off-farm and median farm income.)
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